Wednesday, Apr. 13, 2005

 

Builders hear economic report

The housing industry in our area continues to have a healthy outlook, according to information presented by Curtis Smith of SunTrust Bank Atlanta at the February meeting of the Home Builders Association of Midwest Georgia.

Smith, who is the bank’s first vice president and South Metro manager of residential construction, presented SunTrust’s 8th annual Atlanta Economic and Housing Forecast to the home builders association. The gathering, which drew a crowd of around 175 attendees, was held at the Wyndham Peachtree Hotel and Conference Center in Peachtree City.

Beginning with comments about the national economy, Smith noted that the gross domestic product grew a healthy 4.1 percent in 2004 and that the job market is a lot better than it was last year, even if there is debate over the quality of jobs. “Loan demand at commercial banks is coming back, and a sense of optimism exists,” he said, adding that “our growth now is healthier and more sustainable.”

Nationally, the housing industry has experienced record sales for four years in a row, and Smith said a major reason for this is an extended period of low rates. The healthiest housing markets have been in the South and in the Midwest.

Turning specifically to the Atlanta housing market, Smith pointed out that the Atlanta metro statistical area, now composed of 22 counties, is now above five million in population and is projected to be at six million in 2009. His 2005 housing forecast for the Atlanta area included comments that the Atlanta market is not a real estate bubble due to good population and income growth, and that increases in housing prices will be in the moderate range. The Atlanta area’s challenges in the residential housing field will likely be centered on issues such as lot supply and transportation, while there will be increasing competition and margin pressure within the builder business.

Smith said he believes that the Atlanta area will have a net gain of 50,000 jobs this year, compared to 25,000 last year, and he feels that by the end of the year, the prime interest rate will rise to 6.50 percent and the 30-year mortgage rate will reach 6.5 percent.

Using data provided by Metro Study, an organization which keeps up with homesites and housing in a number of metro counties, Smith talked generally about the North Metro housing market and then gave attention to the market in the Metro South counties.

An interesting factor, he reported, is that townhomes are becoming a larger part of the Atlanta housing market, both in the north and in the south. He expressed the opinion that growth in townhomes is here to stay, as this type of housing fills the void in some lower price points.

In North Atlanta, he said, there is a “mature market” without the spectacular growth as before, but there has been a lot of activity in the higher price points with these areas picking up more market share.

In the Metro South area, the share of the Atlanta housing market has increased from 20 percent to 36 percent during the 2000s. With more interest in this area, there have been a number of new entries in the Metro South market, as firms previously active in North Atlanta have expanded their operations to this area. Generally, Smith reported, Metro South is a much more affordable market, but activity in the lowest price points has dropped off some due to lot inflation while housing starts in the higher price points are showing increases.

As for the individual Metro South counties, Smith had these observations:

• Clayton County is still a steady area with 2,250 closings on new homes last year. Sixty-five percent of the new homes in this county are complete, which is by far the highest figure in the metro area. This is a “market in balance,” but there is an aggressive level of speculative building in the $140,000-$200,000 market in this county.

• Fayette County is a solid market, but not a growth market. Fayette did have more activity last year, with the introduction of several new subdivisions. Only 32 percent of the new homes in the county are complete, which is a very healthy level.

• Coweta County is an area with a rise in both inventory and closings, this county is really starting to grow in the city limits of Senoia and Newnan. Only 35 percent of the new homes are finished, and anything under 40 percent is historically healthy.

• Henry County is traditionally a “booming area” but is starting to cool off a little as annual closing declined slightly to 3,400 units in 2004. There has been a lot of spec building in this market.

• South Fulton County is a new “boom county” which has jumped from 500 housing starts a year at the beginning of the 2000s to 4,500 last year. Fifty-two percent of the new homes are complete with most of those in the $110,000 to $200,000 price range. The supply of new homes is now up to 11 months, the highest in Metro Atlanta. Some developers are buying land here at today’s inflated prices and are competiting with developers who acquired land at much lower prices within the last five years.

Showing a chart of Atlanta’s Top Communities Ranked By Sales, Smith pointed out that SummerGrove, the planned community in Coweta County, was listed as tied in second place in Metro Atlanta with 301 home sales. Also included on the list of 30 Atlanta area communities were four in Henry County (Eagle’s Landing, Monarch Village, Heron Bay and Bristol Park) and Heritage Park and Amhurst in South Fulton County.

Sponsoring the economic forecast meeting were SunTrust Bank and DuPont Tyvek.

The Home Builders Association of Midwest Georgia serves builders in Fayette, Coweta, Spalding, Meriwether, Heard, Pike, Upson, Lamar, Butts and Jasper counties. More information about the group can be obtained by calling Sandy Boda, executive officer, at 770-716-7109.